Registration of Mutual Fund with SEBI: An Overview
Mutual Fund can be defined as a financial instrument that pools money from various investors to invest in securities like government bonds, corporate bonds, stocks, and listed companies and share the profits or losses with the other investors.
A mutual fund is managed by a professional manager of the Asset Management Company approved by the Securities Exchange Board of India (SEBI).
SEBI regulates the Registration of Mutual Funds. The main objective of this regulatory body is to safeguard the interests of the investors and spread awareness about the functioning of mutual funds to simplify the Registration of Mutual Funds with SEBI.
Types of Mutual Funds
The different types of mutual are enlisted below –
Open Ended Mutual Fund
This type of Mutual Fund does not have any lock-in period or maturities and is always open for investments and redemptions. It is beneficial if the investor is looking for liquidity of funds.
- Closed Ended Mutual Funds
Here the mutual funds have a specified lock-in period where the investor can opt for a closed-ended scheme only during the New Fund Offer period, which can be redeemed only after the maturity of the lock-in period.
- Interval Mutual Funds
As the name suggests, this mutual fund enables investors to trade units at pre-defined intervals. This type of fund provides the advantages of both the above-mentioned funds and maintains a balance between them.
Pre Requisites for Mutual Funds Registration with SEBI
There are specific pre-requisites that the applicant must follow for the Registration of Mutual Funds with SEBI, such as.
- The mutual funds must be registered as a trust as per the provisions of the Indian Trust Act 1881
- An AMC with a Minimum Net worth of 5 Crores must be registered separately.
- The applicant must be familiar with specific terms related to the Registration of Mutual Funds with SEBI, such as
- Unit Holders – this is the term assigned to Mutual Funds investors.
- Portfolio- this refers to the basket of securities
- Net Asset Value – This refers to the value of each unit of each mutual fund
- Asset Management Company is an organization that manages the investors' investments.
- A sponsor should make a contribution of at least 40 % towards the Net Worth of the Company.
- It is important to appoint a custodian per the prescribed regulations for the custody of gold and gold-related instruments.
- The applicant must have at least 5 years of experience operating a financial services business and a positive net worth.
- The applicant must fulfil the fit and proper and proper person criteria and have a soundtrack with regard to the business operations.
- The Object Clause of the MOA of the sponsor company must permit the Mutual Fund Activities.
List of Documents for Registration of Mutual Funds with SEBI
The list of Documents for the Registration of Mutual Funds with SEBI is given below-
- A complete list of all the associate companies/group companies/subsidiaries registered with SEBI in any capacity, along with their Registration Numbers.
- Whether any of its sponsors, group or associated companies are listed on any Recognized Stock Exchange.
- List of instances of violation / non-adherence to any securities-related regulations enforced by any regulatory agency in India or abroad & whether any measure has been taken by you in this regard.
- A declaration that the Sponsor Company or the Directors have not been found guilty of fraud, misconduct etc.
- Details of Registration of any of the companies with RBI as NBFC or any other capacity.
- Two sets of MOA & AOA of AMC & Trustee Company (i.e. one for SEBI & another set of ROC records)
- A detailed Business Plan.
- A detailed note on the infrastructure employed by the AMC.
- Auditor’s Certificate certifying that:
- The sponsor has contributed 40% to AMC’s Net worth
- AMC has a Net worth of not less than 5 Crores
- RBI/ other Regulator’s approval for the purpose of sponsoring mutual funds.
- Executed copies of Trust Deed & Investment Management Agreement.
- Undertaking from the Sponsor to provide Additional capital to AMC till its operations breakeven in order to protect the interest of unitholders.
It is mandatory for the applicant to provide all the required information within 30 days of receiving a communication from SEBI, failing which the case will be considered closed.
Procedure for Registration of mutual Funds with SEBI
The following procedure must be followed for the Registration of Mutual Funds with SEBI –
- Filling the Application
The first step for the registration is the filing of Form A by the applicant.
- Submission of Necessary documents along with the payment of requisite fees
The next step is to submit the application form along with the necessary documents together with the payment of the requisite fees as per regulation 3 of the SEBI (Mutual Funds) Regulation 1996.
- Scrutinization of the Application and Documents
The next step is the scrutinization of the whole application, which would include the verification of the application form and the documents.
The applicant must ensure to provide the complete information; otherwise, the Board may reject the application and direct the applicant to complete the required documentation for which the applicant would be provided the time prescribed by the regulation.
Issue of Registration Certificate
The Board shall issue the certificate of Registration after being satisfied with the application and documentation.
A mutual fund shall be paid before the 15th of April each year with an annual fee as specified for every financial year from the year following registration.
Average Assets under Management (AAUM) as on 31 March
AAUM up to INR 10,000 crore
0.0015% of the AAUM
Part of AAUM above INR 10, 000 crore
0.0010% of the portion of AAUM in excess of INR 10,000 crore
Subject to a minimum of INR 2, 50,000 and a maximum of INR 1 00, 00,000.
Where the sponsor does not satisfy the eligibility criteria, SEBI may reject the application and inform the applicant of the same.